Busch Enterprises has budgeted sales for the months of September and October at $120,000 and $150,000, respectively. Monthly sales are 60% credit and 40% cash. Of the credit sales, 25% are collected in the month of sale and 75% are collected in the following month. What are the October cash collections from customers?

Question

Quizplus · Accepted Answer

Step 1: Calculate the total credit sales for September and October:

- September credit sales: 60% x $120,000 = $72,000
- October credit sales: 60% x $150,000 = $90,000

Step 2: Calculate the portion of credit sales that are collected in the month of sale and in the following month:

- September credit sales collected in September: 25% x $72,000 = $18,000
- September credit sales collected in October: 75% x $72,000 = $54,000
- October credit sales collected in October: 25% x $90,000 = $22,500
- October credit sales collected in November: 75% x $90,000 = $67,500

Step 3: Calculate the total cash collections for October:

- October cash sales: 40% x $150,000 = $60,000
- September credit sales collected in October: $54,000 (from Step 2)
- October credit sales collected in October: $22,500 (from Step 2)
- Total cash collections for October: $60,000 + $54,000 + $22,500 = $136,500

Therefore, the best choice is C ($136,500).

Busch Enterprises Has Budgeted Sales for the Months of September